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Natural Gas News: Market Balancing Bearish Fundamentals with Technical Resilience

By:
James Hyerczyk
Updated: Mar 3, 2024, 06:25 UTC

Key Points:

  • U.S. natural gas futures rise, bucking low demand trends.
  • Surprising storage withdrawal momentarily boosts market sentiment.
  • Mild winter and stable production lead to high stockpiles.
Natural Gas News

In this article:

Natural Gas Market Overview

U.S. natural gas futures demonstrated resilience last week despite low demand, influenced by favorable weather conditions and substantial supply. The market appears to be balancing bearish fundamentals against technical trading strategies focused on exploiting oversold conditions.

Last week, natural gas settled at $1.835, up $0.147 or +0.71%. This was the second consecutive weekly higher close.

Daily Natural Gas

Recent Market Conditions

In recent sessions, bearish fundamentals have been weighed against technical traders seeking to benefit from oversold conditions. A notable storage withdrawal, larger than expected, was observed on Thursday, momentarily injecting bullish sentiment. However, this failed to reverse the trend of consecutive monthly declines, the longest since March 2020. The decline is attributed to a mild winter, resulting in high stockpiles and consistent production, even with January’s brief disruption.

Production and Supply Insights

February’s production in the U.S. Lower 48 states averaged 105 billion cubic feet per day (bcfd), just below the record high in December. The market initially responded positively to the unexpected storage withdrawal, but this was soon tempered by an oversupplied market and lack of sustained buying interest. Future weather forecasts are crucial in shaping demand, with natural withdrawal decreases expected as spring approaches.

In 2023, the U.S. continued as Europe’s main supplier of liquefied natural gas (LNG). Europe’s LNG import capacity is set to rise, spurred by efforts to diversify energy sources post-Russia’s Ukraine invasion. Despite high natural gas storage levels due to Europe’s mild winter, the increased capacity and record LNG imports have impacted demand and prices.

Short-term Market Forecast

From a fundamental standpoint, the short-term outlook for U.S. natural gas prices leans towards a bearish trend. The mix of ample storage, steady production, and moderate weather conditions limits the potential for significant price hikes. As the heating season wanes, a decrease in demand is likely, potentially leading to a surplus in storage. On the technical front, oversold conditions might prompt a brief short-covering rally. However, any significant rally could face renewed selling pressure, as substantial price increases are unlikely until a significant reduction in supply occurs. Traders should remain vigilant, monitoring weather forecasts and storage data for market shifts.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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